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This content was published on October 26, 2017 9:27 PMOct 26, 2017 - 21:27

Leader of the Christian Democratic Union of Germany (CDU) Angela Merkel is seen on a balcony of German Parliamentary Society offices before the exploratory talks about forming a new coalition government held by CDU/CSU in Berlin, Germany, October 26, 2017. REUTERS/Fabrizio Bensch

(reuters_tickers)

By Andreas Rinke and Emma Thomasson

BERLIN (Reuters) - Three German parties resigned themselves to further talks next week to try to form a new coalition after making little progress on Thursday in bridging deep divisions on immigration and climate policy.

Chancellor Angela Merkel is trying to unite her divided conservative alliance, which suffered bruising losses in a national election last month, in a pact with two other parties that is untested at federal level.

After 11 hours of talks on Thursday, negotiators said they had failed to find much common ground on the difficult topics of climate change and immigration, but would take the weekend to consider the arguments of the other parties.

"We hope to take further steps in the course of next week," Nicola Beer, general secretary of the pro-business Free Democrats (FDP), told journalists.

Immigration was the most divisive topic, with many conservatives keen to take a harder line after blaming their election setback on Merkel's decision to open Germany to more than a million mainly Middle Eastern migrants in 2015 and 2016.

An agreement reached between Merkel's Christian Democrats (CDU) and their Bavarian CSU sister party to cap annual refugee numbers had to be the basis of any coalition accord, Andreas Scheuer, CSU general secretary, said after Thursday's talks.

"That is really going to be the crunch point," he said, adding that the issue was the reason for the gains of the anti-immigration Alternative for Germany (AfD) party in the election.

Party leaders would meet to seek a solution on refugee policy by next Thursday, sources close to the talks said.

The environmental Greens, who oppose a refugee cap, said positions were far apart on immigration: "The debate on this topic was calm and constructive but the differences remain serious," said Greens negotiator Michael Kellner.

CLIMATE CHANGE, EUROPE

The parties did agree to stick to climate goals that envisage cutting carbon dioxide emissions to 40 percent of 1990 levels by 2020, but were still divided on how to achieve that, sources familiar with negotiations said.

Kellner reiterated the Greens' position that Germany should quickly close coal-fired power stations to help fight climate change, a position resisted by the other parties.

"We are the first generation to experience climate change and we are the last generation who can stop it," he said.

The parties made limited progress on European policy, agreeing a broad-brush statement that said that "Germany can only do well if Europe does well" while listing 25 open points for further debate.

Politicians say it could take months to form the coalition, leaving Germany hobbled as the European Union looks to its wealthiest country for leadership on governance reform.

In a nod to ambitious European reform plans laid out by French President Emmanuel Macron, the statement said Franco-German cooperation was "of paramount importance to us."

The parties' negotiators agreed to further discuss EU reform issues including a euro zone budget - an idea pushed by Macron - and the future of the euro zone's rescue mechanism, the ESM.

Sources close to negotiations said there was a consensus against a euro zone budget, but the parties did not want to immediately reject Macron's proposal.

The statement stressed that talks with Britain on leaving the EU must respect the interlinkage of the bloc's principles of free movement of capital, citizens, goods and services, which could suggest that Berlin wants to take a hard line with London.

Kellner said the parties were far apart on the ESM, which some conservatives want to see play a stronger role in preventing economic crises in the euro zone.

(Additional reporting by Markus Wacket; Editing by Richard Balmforth)

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